California may waive environmental rules for Tesla battery factory

Tesla Motors CEO Elon Musk holds up a bottle of wine given as a gift from one of the company's first customers, right, during a rally at the Tesla factory in Fremont, Calif., in 2012.
(Paul Sakuma / Associated Press)

The state would exempt Tesla Motors Inc. from some of its toughest environmental regulations as part of an incentive package being discussed with the automaker to build a massive battery factory in California, a key state senator said.

“It would help them speed the process,” Sen. Ted Gaines said after a Friday meeting with Tesla officials at the company’s Palo Alto headquarters and assembly line in Fremont, east of San Francisco.

The plan being negotiated in the office of Gov. Jerry Brown could grant the automaker waivers for significant portions of the nearly half-century-old California Environmental Quality Act, Gaines said. The proposal is alarming some environmentalists.


The governor’s pitch also includes a number of tax breaks for Tesla that could be worth as much as $500 million, or about 10% of the project’s total cost, said Gaines, a Republican representing the Sacramento suburb of Rocklin. He and Senate President Pro Tem Darrell Steinberg (D-Sacramento), are the coauthors of a proposed Tesla incentive bill that would put the package of incentives into law.

The Brown administration is hustling to compete with four other states — Nevada, Arizona, New Mexico and Texas — for what Tesla Chief Executive Elon Musk calls his “gigafactory.” Musk has described California as a “long shot” for snagging the proposed plant.

Tesla says the plant, which will make batteries for a new, moderately priced model, is expected to cost $5 billion and employ 6,500 workers.

Gaines, who said he was briefed by the governor’s economic development experts last week, said the administration and lawmakers are hurrying to complete the package before the legislative session closes at the end of August.

“We are waiting for the finalization of the details,” he said. “We know we have to move quickly.”

A representative of the governor’s economic staff did not respond to requests for comment on the negotiations with Tesla.


Musk has said that a quick environmental review was essential to getting the plant up and running by 2017 to meet growing demand for planned moderately priced Tesla cars.

“Timing for the gigafactory is very important,” Tesla spokesman Simon Sproule said Monday. “So all five states in the running for the gigafactory need to demonstrate, among other factors, that they can help us deliver the factory on time.”

California’s landmark environmental statute, widely known by its acronym CEQA, was signed into law by former Gov. Ronald Reagan. It requires state and local government agencies to review development projects to identify potential threats to the environment and recommend ways to reduce or eliminate any potential damage.

Among the incentives under discussion have been provisions to limit prior environmental review of plans for the California battery plant location — if Tesla chooses to locate here.

“I think that’s a possibility,” Gaines said.

According to state officials who said they were familiar with discussions but not authorized to speak about them, Tesla also might be allowed to start construction and mitigate any potential damage later. Also being discussed is whether to limit lawsuits that could slow the project.

Environmental activists were critical of any attempt to waive CEQA regulations, especially for such a notably “green” company as Tesla, whose all-electric cars emit no greenhouse gases or other air pollution.


“I think it’s a terrible idea,” said David Pettit, a lawyer specializing in environmental review laws for the Natural Resources Defense Council. “For one thing, it does indicate that we have two systems of law in California — one for the super rich, and one for the developer doing multifamily housing.”

The idea of essentially waiving CEQA is “unacceptable,” said Kathryn Phillips, director of the Sierra Club in California. “It sounds like you’re taking away environmental review and taking away citizen enforcement … for a single project.”

A suspension of strict pre-construction reviews — if it ends up in the package of incentives — would go far beyond the Legislature’s past efforts to boost favored projects by speeding up environmental studies and limiting opponents’ abilities to delay projects with time-consuming lawsuits.

In recent years, lawmakers gave such special treatment to developers interested in building pro football stadiums in Irwindale and downtown Los Angeles, as well as a National Basketball Assn. arena under construction for the Sacramento Kings.

Tesla has not made any final announcements about where its battery plant or plants might be.

But last month, the automaker confirmed that it already began site preparation work near Reno for what could be the first of several lithium-ion battery plants.


Twitter: @MarcLifsher